Landlords feel they have nothing to lose but their ties

Jul 9 2008 by Graeme King, The Journal

Two veterans of the North East pub trade are at the heart of a campaign taking on the giants of their industry to fight for a fair deal. Graeme King spoke to both sides of the Fair Pint campaign.

WE ARE all probably guilty, sometimes, of not taking the trouble to understand what kind of business we are buying from – be it groceries, financial services, or even having a quiet pint.

You get out of work in the evening, wander along to the supermarket, get a few things for dinner, then on a Friday night head to the pub with a few colleagues to start the weekend.

But now the Fair Pint campaign is aiming to rouse us from our collective stupor and make us understand what goes on in the licensed trade – and especially the giant pub companies or PubCos, which now own more than 30,000 UK pubs (55% of the total) and so exert a lot of influence on how the industry works. The campaign argues that the PubCos have too much control over how their pubs work, not allowing individual tenants to run them as they wish – or make a reasonable living from them.

The business model works by the PubCos owning the bricks and mortar of a pub, then granting leases on them to individual tenants.

But the controversial part of the arrangement is that those leases oblige tenants to buy all their beer from the PubCos, known as being “tied”, at prices which tend to exceed what tenants could pay on the open market.

This squeezes the profit margins of the tenants so hard that many are going out of business, as they simply cannot do enough trade to make their leases pay.

The Fair Pint campaign argues that PubCo tenants ought to be “free of tie” to allow them to buy what beer they want, at price they can negotiate themselves.

Steve Corbett has been in the licensed trade for nearly three decades, initially running bars in the Bigg Market in Newcastle, then moving to London to work for the City Leisure Group.

He then ran his own business for 10 years, but now says it’s become too tough because of the PubCo dominance. So he and campaign colleague Mark Dodds, who has 13 years’ experience himself, set up the Fair Pint campaign to challenge the likes of Punch Taverns and Enterprise Inns to release their grip on the pub and bar industry.

So far, 50 MPs have signed up to the campaign, including Blaydon’s Dave Anderson and Sir Alan Beith, of Berwick.

The Campaign for Real Ale is also a supporter, and it has been bankrolled by Mean Fiddler founder Vince Power, one of the most powerful people in the UK’s live music industry.

Some success has already been achieved, with the Business and Enterprise Committee saying it is launching a follow-up to the 2004 Trade and Industry report on the licensed trade.

Committee chairman Peter Luff MP says he wants to see whether pub companies are treating leaseholders fairly. The investigation will publish its conclusions later this year. Mr Corbett said: “The Fair Pint stance is that we are not trying to bankrupt the PubCos, but we do want the end of the tie.

“The biggest argument the PubCos use against that is that if the Government removed the tie, they would make up the shortfall by shoving it on the rent.

“That’s a stick they use to scare tenants, who are scared because generally the pub is not just their livelihood, it’s their home as well.

“But the way rents are worked out – that won’t change whether tied or free of tie. We estimate that if tenants were £10,000 per annum better off without the tie, their rent would go up by half of that.

”Tenants are really, really scared, and we want to get to them and let them know it could be so much better.

“The Government has only been told one side of the story. Bodies like the BBPA (British Beer & Pub Association) – they are all funded by the PubCos. On the other side of the fence, there are around 30,000 tenants who struggle to make a living, but they are not united as one specific body.”

Blaydon MP Dave Anderson is a keen supporter of the Fair Pint campaign, thanks to some personal experience.

He said: “I’ve had the sad experience of seeing three great pubs run by wonderful, hardworking people being allowed to be run down because of the impossible demands of absentee landlords who pushed up the price of beer and rent to levels where the tenants had to leave.

“This is an abuse of a virtual monopoly that the companies run to their own benefit with little regard for their tenants or customers.” However, chief executive of the Federation of Licensed Victuallers Associations Tony Payne said he believed now was not the right time for the Fair Pint to start its fight, when individual tenants are struggling to make a living simply because of the state of the economy.

He said: “A lot of pubs are closing now, which is down to the money in the customers’ pockets. The big thing is customers have not got the money – even supermarkets have to have sales on just now.

“We are asking the big companies to assist licensees with problems, and they are giving some help. We are concerned for our members. This campaign will take a long time. What we want to do at this moment in time is sit down with the companies and get some agreed assistance, rather than going for this long-term campaign.

“When business improves, we can review our position.”

A spokeswoman for Punch Taverns said: “It is not in our interests to see any of our businesses fail and we continue to work closely with our licensees to build sustainable businesses.

“We are confident that we are set up well structurally and culturally, with good communications lines for our licensees enabling them to talk to us on an individual basis when they need to do so.

“We are fully committed to continue to listen to and work with our customers, supporting them as best we can.”

For more details, visit: http://www.fairpint.org.uk/

PAGE TWO: The heart of the Fair Pint campaign.